The Changing Strength of the Dollar

Chart Changing Strength of the Dollar

The fluctuating values of global currencies contribute to corporate earnings volatility as well as the attractiveness of a country’s goods in the global trade market. In the past few years, the U.S. dollar has moved sharply upward and downward in relation to other global currencies, and its movements have been felt across financial markets. From the beginning of 2017 to the beginning of 2018 the dollar weakened substantially against global currencies, providing a tailwind to corporate earnings and making U.S. goods relatively cheaper on the global trading market. In early 2018 the dollar shifted gears and began appreciating against global currencies, which has continued in the early part of 2019. The appreciating dollar has presented U.S. multinational companies with headwinds to earnings growth, as earnings from foreign subsidiaries are worth less when converted back to dollars. While a strong dollar is not the only factor causing a slowing of growth in U.S. corporate earnings, it is certainly contributing to the much slower earnings growth that we saw in Q1.